If Treasury Secretary Timothy Geithner had his way, that extra cushion would be a lot thinner, in what might be the biggest news nugget in a new book out Tuesday by former Federal Deposit Insurance Corp. Chairman Sheila Bair.

At issue is the new bank-capital rules that international regulators in Basel, Switzerland hammered out after the financial crisis to help avoid a repeat. Bair contends that Geithner worked behind the scenes to set lower capital rules than the FDIC and Fed wanted.

A Treasury spokeswoman declined to comment.

To be sure, Geithner was a vocal supporter for raising capital standards from their pre-crisis lows. While still at the New York Fed, he advocated for new rules that would give banks “a stronger set of shock absorbers, in terms of capital and liquidity.”

But Bair contends that Geithner didn’t want to raise capital standards as high as Federal Reserve and FDIC officials, who had the real authority on the issue.

In her book, Bair says that early on Geithner started organizing meetings of U.S. banking regulators that belong to the Basel group to formulate the U.S. negotiating position — even though Treasury isn’t a member of the committee.

Bair said she sensed that Fed Chairman Ben Bernanke and governor Daniel Tarullo were “uncomfortable” with the Treasury-organized meetings since the Fed is the head of the U.S. Basel delegation. A Fed spokeswoman declined to comment.

“[I]t wasn’t clear whether Tim was trying to build consensus among the U.S. regulators or trying to stir the pot,” she writes, noting that Geithner wouldn’t really tell the others what his views on the issue were.

Geithner personally lobbied Bair to support a lower base capital level, in a moment she described in a memo to herself at the time as “a new low” in their often-rocky relationship, Bair writes.

Later, when the Basel committee moved on to negotiate the so-called capital “surcharge” that international regulators agreed to levy on the world’s biggest banks, Geithner was behind the scenes advocating for a surcharge of 1.5% of a bank’s risk-weighted assets, Bair said, which the Fed’s Tarullo relayed to her. The Fed and Bair wanted a maximum of 3%.

In the end, the Basel negotiations settled on a top surcharge of between 1% and 2.5% depending on how risky a bank is, with the threat of a bank being moved up to 3% if they manage to make themselves more risky.

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